Summary:
- Virginia’s minimum wage increase has benefitted most workers with little downside
- Virginia employees also continue to earn higher wages than North Carolinians
- Doomsday predictions of job loss have not materialized
We have written before about the remarkable “natural experiment” between North Carolina and our neighbor to the north, the Commonwealth of Virginia, on the latter’s minimum wage increase. Three years on since the first bump to the Commonwealth’s minimum wage in May of 2021, it’s time for an update on whether the doomsday predictions of Virginia’s big corporate lobby have come to pass. What has the real-world evidence showed about the effect of a higher minimum wage on job growth and real wages in workers’ pockets?
Background
In 2021, Virginia’s new Democratic-majority legislature passed a phased-in increase to the Commonwealth’s minimum wage, which would bring it from the federal minimum ($7.25/hour) to $15/hour in 2026, mostly in one dollar annual increments. From Carolina Forward’s coverage then:
Virginia’s conservative big business community, led by its state Chamber of Commerce and Republican leadership, loudly opposed the 2020 minimum wage hike by predicting dire consequences for job growth, calling higher wages a “job killer.” They warned of massive layoffs, a cratering of small businesses, and a dimmer “business climate” that would send jobs to lower-wage states – like North Carolina, Tennessee, or Georgia. “The Chamber,” as it is known in most states, spent heavily on advertisements opposing the increase, only to see Democrats pass it anyway. (Read: The Great Wage Experiment)
North Carolina, of course, has seen no increase in the statutory minimum wage. It’s no surprise that Democratic bills filed to increase the state’s minimum wage have never gotten out of committee in our state’s gerrymandered Republican legislature. Though a shame for North Carolina’s workers, this divergence set up a perfect opportunity to witness a side-by-side comparison the impact of different economic policies.
The winner: Virginia workers
Contrary to some dire predictions by the big business lobby, the Commonwealth has seen no obvious penalty in job growth from its steady minimum wage hike. Virginia’s overall unemployment rate remains measurably lower than North Carolina’s, even in the midst of wage increases:
Since the question of impact on jobs itself is settled, the next obvious question is: did those wage increases actually benefit Virginia workers?
The answer here, too, seems to be in Virginia's favor. In the last 3 years since the Commonwealth's minimum wage increase, its workers have continued to out-earn North Carolinians - though the gap is closing:
The tremendous improvement in the U.S. labor market under the Biden administration since the pandemic-era crash has led to most real wage growth occurring among the lowest-paid workers. With the U.S. labor force participation rate now at its highest point in over 20 years, businesses are now being forced to offer higher wages to lure in new workers.
The effects of minimum wages are one of the most hotly contested topics in the field of economics. Yet the volumes of economic research on the topic generally come to the same conclusion: reasonable, measured increases in the minimum wage have little or no effect on unemployment, and in fact, lead to stronger and faster economic growth. North Carolina lawmakers should reconsider their stubborn resistance to hiking the state's minimum wage.
And the best news? North Carolina voters agree.
